Scotch & Soda's bankruptcy: what preceded it?
On March 20, Dutch fashion retailer Scotch & Soda reported that it had filed for bankruptcy for its Dutch operations, after which the company was also declared bankrupt. It is a result of "severe cash flow problems" due to the lockdown imposed during the Covid-19 restrictions in The Netherlands and the energy crisis and high inflation that followed, Scotch & Soda revealed in a statement. But, what else preceded the company's bankruptcy? FashionUnited lays out all the developments that have caused trouble for the Amsterdam-based clothing brand in recent years.
After consecutive financial years in which Scotch & Soda posted red figures, in the financial year 2018 makes a comeback, and once again makes a net profit. That year, the Amsterdam-based fashion brand posted a net profit of 915,000 euros and a turnover of 339 million euros. But in the financial year 2019, Scotch & Soda sees its sales decline again. With a three per cent drop, sales settled at 328.7 million euros.
The declining sales in 2019 marked the beginning of the misery, as the corona virus upturns the whole world in early March 2020. That year, Scotch & Soda applied for a multimillion-dollar loan to help the company through the health crisis. The fashion brand's US owner Sun Capital lends the company 15 million euros and a consortium of Dutch banks lends the fashion brand the same amount. Thomas Bervoets, chief finance officer at Scotch & Soda, reports that the brand has been hit hard. "Our first priority in March was to keep cash in the business," he said. Almost all branches in the fashion brand's portfolio closed in mid-March due to lockdowns, with the exception of those in Sweden. As a result, sales fell 12 per cent and the company made a loss of 159.6 million euros.
2021 - March
After suffering heavy losses, Scotch & Soda and launched a new brand identity. 'Amsterdam couture' becomes 'The free spirit of Amsterdam' which is an ode to 'the free spirit' of the Dutch capital. Aside from a new brand identity, it also revamps its logo. The fashion brand's online channels are to be refreshed, as well as several shops. Moreover, the company plans to open 15 international shops and 12 shop-in-shops. By March 2021, the counter will stand at 225 and 161.
As the first part of the expansion, it would open a shop in Utrecht and a boutique in the Westfield Mall of the Netherlands. This will be followed by the opening of the fashion brand's largest flagship store worldwide: a 510-square-metre shop, located in a former 1919 theatre, in the city of Den Bosch in the southern part of the Netherlands.
Internationally, shops are set to open in Konstanz and Hamburg in Germany, Nice in France and in locations in Ukraine, Poland and Switzerland. Shop-in-shops will be in Åhléns department stores in Sweden, among others. Outside Europe, Scotch & Soda is preparing four shop openings in the US (there are 43 shops in the country by that point), as well as its debut in Israel, Qatar, the United Arab Emirates and Kuwait the next year. New branches will also open in Australia and India. Finally, Scotch & Soda plans to open additional showrooms and offices in Shanghai and Milan in spring 2021.
2021 - October
In October, Scotch & Soda announced more expansion plans as well as plans to open another 15 new shops and seven shop-in-shops worldwide. The shops will be located in several major cities, including Paris, Madrid, Mumbai, Bucharest, Perth and Riyadh. To support the expansion, the company opened an additional distribution centre in Hoofddorp, Near Amsterdam. The centre comprises 27.5 thousand square metres and features solar panels and vertical gardens.
To support the company's growth, Scotch & Soda's owner Sun Capital poured an additional 15 million euros into the company. In addition, Sun Capital converted a shareholder loan worth 200 million euros into shares to provide financial support to the fashion brand to help it get through the corona crisis. Scotch & Soda sees a sales decline of four per cent in the financial year 2021. The sales decline is relatively small compared to many other brands. The company owes this to strong results from its online store, which saw an eighteen per cent increase in sales.
2022 - January
As if Scotch & Soda did not already have enough countries in its portfolio, it then added China. In January, the fashion brand is to open a flagship store in Shanghai's Xintiandi district. The shop measures 289 square metres and will be decorated according to the 'Free spirit' brand concept launched in 2021. A shop opening in Taikoo Li mall, also in Shanghai, is scheduled to follow later in 2022, followed by two shops in the Beijing Sanlitun and Shanghai Reel malls.
2022 - April
After conquering China, Scotch & Soda announced further expansions. For instance, it planned to open 20 new physical shops over a six-month period in London, Milan, Washington D.C., Dubai, Doha, Tel Aviv, Johannesburg, Cairo, Shanghai and Beijing, among others. After these expansion plans have been executed, the tally will stand at 50 Scotch & Soda shops in North America, 155 stores in Europe, five shops in China and 18 stores in the Middle East and Africa.
2022 - June
The previously announced shop opening in Milan becomes a reality in June 2022. The flagship store is 185 square metres and is spread over two floors. Frederick Lukoff, CEO of Scotch & Soda, said in the press release at the time: "The opening of our flagship store in Milan strengthens our presence in Italy, an important market that we think has a lot of potential. It is a great opportunity to reach new local and international customers at a prestigious location and introduce them to our brand inspired by the free spirit of Amsterdam. The opening marks an important milestone in our current European and global growth strategy." In addition to the Milan opening, Scotch & Soda will open more shops in Europe in the second half of 2022, including a flagship store in Covent Garden in London, as well as new locations in the Netherlands, Germany, France, Belgium, Sweden and Denmark.
2022 - November
Scotch & Soda's expansion is reaping rewards. Indeed, the fashion brand is posting a double-digit sales growth. This growth also puts its sales above pre-pandemic levels. In 2019, it recorded sales of 328.7 million euros. In November 2022, it can write a turnover of 342.5 million euros in its books.
After a considerable amount of expansion, made possible in part by parent company Sun Capital's multimillion-dollar investment, news emerged in March that Sun Capital is considering selling Scotch & Soda, as Sky News reported on the basis of anonymous sources. Scotch & Soda informs FashionUnited that it will not comment on the rumours.
On March 20, 2023, Scotch & Soda announced it had filed for bankruptcy for its Dutch operations, after which the company was declared bankrupt.
This article was originally published on FashionUnited.NL and has been translated and edited from Dutch into English by Veerle Versteeg.